How many midcap funds have beaten the benchmark?

MidCap Funds are something I love a lot. Though it adds significantly to the portfolio’s volatility.

I have noticed throughout the years that mid-small business performance is highly cyclical. They have some connection to both the macro and micro-economies, both nationally and internationally.

Any advisor or investor who can correctly predict even 50% to 60% of the cycle in this market will be doing a fantastic job.

As I have stated in prior posts, when you feel an opportunity is good and are convinced by the facts, you must bet big on it to generate alpha.

Let us backtrack and see how many Mid-cap Funds have outperformed the benchmark:

Fund Name	Age (years)	AUM Cr.	St. Dev.	Sharpe	3Y	5Y	7Y	10Y
Quant Mid Cap	22.26	1872	13.38%	0.42	37.81%	18.65%	16.58%	15.46%
Mirae Asset Midcap	3.84	9270	19.62%	0.77	36.16%	–	–	–
Kotak Emerging Equity	16.21	25972	18.28%	0.41	35.95%	14.76%	16.65%	20.33%
DSP Midcap	16.59	13441	18.45%	0.43	22.28%	9.75%	13.39%	17.45%
SBI Magnum Midcap	18.22	9370	20.29%	0.5	40.66%	15.01%	14.06%	19.57%
Nifty Midcap 150	12.17	–	17.35%	0.45	36.55%	13.52%	16.20%	17.63%
HDFC Mid-Cap	15.98	36912	17.32%	0.55	37.67%	13.79%	16.27%	19.75%
PGIM India Midcap	9.52	8072	17.03%	0.6	40.37%	17.57%	17.30%	–
Edelweiss Mid Cap	15.47	2787	19.03%	0.3	35.82%	13.80%	16.63%	20.32%
Invesco India Midcap	16.16	2803	17.85%	0.48	30.71%	14.50%	15.86%	19.04%
AXIS Midcap Fund	12.31	19539	14.55%	0.68	26.40%	15.15%	16.61%	18.63%
Whiteoak Capital Mid Cap	0.72	591	11.12%	0.04	–	–	–	–

You may be asking yourself why I only took 3,5, 7, and 10 years. Given that MidCap Funds are more volatile than Large Cap. Having a minimum time horizon of three years is prudent.

The ones shown in blue in the accompanying table from the last three years are the ones that have surpassed the threshold. Green is the color used to mark benchmarks.

The ones which are marked in blue color or beaten benchmark are by no means any recommendation.

Eight to nine MidCap funds out of twelve have outperformed the benchmark over the past five, seven, or ten years.

What are we to infer from this, then?

Investments will be based on the investor’s time horizon and level of risk tolerance.

You can exit between 2-4 years if you understand the cycle as I described previously.

In my observations, most of them look at prior performance before investing.

Formerly top performers will fall behind in the next years, which is inevitable.

You need to know why those MidCap funds have performed successfully and how they will perform in the future.

The value style has led the rankings if you have been paying attention for the past 1.5 years. Growth-oriented funds have lagged.

Why?

Due to the macroeconomic circumstances, investors believe that when interest rates rise, mid-cap companies’ borrowing costs would rise and their balance sheets will become more strained.

As a result, the companies’ earnings will decrease.

Let me pause it here and continue the rest in the second part.

On a lighter note, I see that the attention span of readers does not beyond 500 words.

What I will cover in the second part. The above table only shows you point-to-point returns, is that correct? or what is the other way of looking at it?

Some data points in regards to risk vs returns, and how should investors look at mid-cap funds as per their objectives?

Stay tuned.